Kimbell Royalty Partners (KRP) pays a quarterly 55 cents dividend, which varies each quarter. However, analysts feel confident Kimball can sustain this dividend, securing the 11.94% yield at today's price of $18.62 for KPR stock (i.e., $2.20 annualized dividend/$18.62). Kimbell will release its results and declare its dividend on Nov. 3.

This is based on analysts' forecasts that the oil and gas royalty company benefits from high oil prices as well as increasing production from its vast numbers of working wells. For example, Kimbell Royalty has operations in 28 states and had interests in 122,899 wells across the U.S.

In fact, even in a worst-case scenario, the low end of the dividend yield range is about 10.0%. For example, averaging the past three quarters' dividends (i.e., $0.55, $0.47, and $0.37), the annual dividend is $1.85 (i.e., $0.4633 x 4 = $1.853). That brings the dividend yield to about 10.0% ($1.853/$18.62 = 9.95%).

Analysts Are Positive on Kimbell Royalty Stock

At least one analyst on Seeking Alpha expects that Kimbell's oil well production (and hence its royalties) will increase by 4% for Q3. This analyst expects the company will keep its dividend over 50 cents per quarter for the next year and a half. That keeps the KRP stock dividend yield in the middle of the range between 10% and 11.9%.

However, the average of 3 analysts surveyed by Seeking Alpha is $1.83 in earnings per share (EPS) this year and $1.73 next year (4 analysts). These are significantly below the present $2.20 annualized dividend payment at 55 cents per quarter as in Q2. 

However, the company uses a different metric to allocate its distributions. For example, last quarter it said 74 cents per share of cash was available for distribution. That is why Kimbell paid out 55 cents per share, even though EPS was just 55 cents.

The reason is the company bases its cash available for distribution on adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a cash flow measure. Kimbell also deducts cash interest and taxes from this metric:

This shows that based on $46.7 million in adj. EBITDA last quarter it was able to pay out 75% of the 74 cents per share in available cash per share.

That leaves plenty of room for the company to keep making that 55 cents quarterly payout going forward with its cash flow 35% higher than the payout (i.e., $74/.55=1.345).

Where This Leaves Investors in KRP Stock

So far this year, KRP stock is up almost 25%, and it looks poised to move higher. In the last month, it is up over 6.3%.

However, the stock tends to move significantly around the time when its dividend is declared. Investors may want to get in now before the dividend is announced as it could be volatile after that.

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